- July 28, 2022
- Posted by: Ramkumar
- Category: Posts
Business Model VS Strategy
When startup founders reach out to me, the one invariable topic of discussion revolves around the #businessmodel. I understand their rationale because when you start a business and when the founders are unsure about its future, the most basic question that any investor ask are:
1)How will the firm generate money?
2)Where will the revenues come from, and what are their costs?
3)How and when will the business become profitable?
The business model helps founders explore answers to the above questions.
However, in my view, the 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐦𝐨𝐝𝐞𝐥 𝐝𝐨𝐞𝐬𝐧’𝐭 𝐡𝐞𝐥𝐩 𝐬𝐭𝐚𝐫𝐭𝐮𝐩𝐬 𝐝𝐞𝐯𝐞𝐥𝐨𝐩/𝐚𝐬𝐬𝐞𝐬𝐬 𝐜𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐚𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞. Thus, founders should have a #strategy that answers any investor on:
1)How can we make more money than competitors?
2)How long can we generate superior returns than our competitors?
In effect, a sound strategy looks at 𝙧𝙚𝙡𝙖𝙩𝙞𝙫𝙚 𝙘𝙤𝙨𝙩𝙨/𝙥𝙧𝙞𝙘𝙚𝙨 𝙖𝙣𝙙 𝙡𝙞𝙣𝙠𝙨 𝙩𝙝𝙤𝙨𝙚 𝙩𝙤 𝙩𝙝𝙚 𝙖𝙘𝙩𝙞𝙫𝙞𝙩𝙞𝙚𝙨 𝙖𝙧𝙤𝙪𝙣𝙙 𝙩𝙝𝙚 𝙫𝙖𝙡𝙪𝙚 𝙘𝙝𝙖𝙞𝙣 𝙖𝙣𝙙 𝙪𝙡𝙩𝙞𝙢𝙖𝙩𝙚𝙡𝙮 𝙩𝙤 𝙩𝙝𝙚 𝙋𝙉𝙇/𝙗𝙖𝙡𝙖𝙣𝙘𝙚 𝙨𝙝𝙚𝙚𝙩.
Thus, i always tell founders that if you want a viable business, the business model helps, but if you wish for superior profitability, develop a sound strategy.
Thus, founders should move away from 𝗧𝗔𝗠 𝗮𝗻𝗱 𝗺𝗮𝗿𝗸𝗲𝘁 𝘀𝗵𝗮𝗿𝗲 and start thinking about the #valuechain and how their business will develop a sustainable #competitiveadvantage that helps achieve superior profitability over its competitors.
As an investor/VC firm, i am interested in that part of the pitch deck.